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Writing Worth Reading

Instinct Can Beat Analytical Thinking

Interview with psychologist Gerd Gigerenzer, defending intuition as our best decision-making tool despite its vulnerability to heuristics and biases. He argues that in conditions of uncertainty – which is to say, almost all of the time — we do not have the precise data we need for precise analytical evaluations; and the more we substitute estimates for data, the more error we introduce into our calculations (2,850 words)

High Frequency Trading: Threat or Menace?

The furore is overblown. “Yes, the stock market is rigged, but it’s always been rigged, and that hasn’t prevented it from delivering pretty impressive returns to long-run investors. Yes, we should strive toward a market that’s rigged in the least expensive, most transparent, most efficient, most stable way possible. I don’t think we’ll ever get rid of the people (or computers) in the middle making money off the customers, though” (1,160 words)

How Silicon Valley Became The Man

Excellent interview with Fred Turner, author of From Counterculture to Cyberculture, about the mash-up of hippy and big-business cultures in Silicon Valley. “Bureaucratic systems are good for distributing resources. You have to negotiate. You have to express what resources exist and how they should be distributed. In a communal system built around shared consciousness, people with charisma start to lead” (2,600 words)

Start Thinking Like A Data Scientist

Collecting and analysing data is the new literacy. “Managers who can’t conduct basic analyses, interpret more complex ones, and interact with data scientists are already at a disadvantage.” For example: “Five meetings began exactly on time, while every other meeting began at least seven minutes late. Bringing meeting notes to bear reveals that all five meetings were called by the Vice President of Finance. Evidently, she starts all her meetings on time” (940 words)

How Google Sold Its Engineers On Management

Google’s technocratic culture breeds skepticism about managers. “A company built by engineers for engineers”. But when the founders tried a flat structure, a few years in, it didn’t work. Trivial questions came straight to the top. The compromise: to have managers, but not very many, and to accept that good ideas count for more than formal seniority. “Seldom do employees accept top-down directives without question” (4,100 words)

What We’ve Learned From The Financial Crisis

There’s been a general lowering of confidence in the efficiency of markets. At the academic level, three shifts in thinking stand out: (1) Macroeconomists are realising that it was a mistake to pay so little attention to finance. (2) Financial economists are wrestling with some of the broader consequences of market misbehaviour (3) The principal-agent model is no longer presumed to work so well in the corporate world (4,500 words)

Fama, Shiller & Hansen

A most unusual Nobel prize for economics this year, shared between Eugene Fama, for arguing that financial markets are efficient; Robert Shiller, for arguing that they are not; and Peter Hansen, who would seem to fall somewhere in between, to the extent that anyone understands his work. It’s hard to imagine a Nobel physics prize being distributed in this way — for a lively debate, rather than a fundamental discovery (1,350 words)

Understanding The Washington Game

On the game theory of the American government shutdown; why we have brinksmanship rather than equilibrium. “It’s an interaction among agents who base their decisions on limited information about actions of other agents in the recent past.” To quote Thomas Schelling: “If I say ‘Row, or I’ll tip the boat over and drown us both’, you’ll say you don’t believe me. But if I rock the boat so that it may tip over, you’ll be more impressed” (2,260 words)

Nate Silver On Teaching Yourself Statistics

Interview. “The thing that’s toughest to teach is the intuition for what are big questions to ask. That intellectual curiosity. That bullshit detector for lack of a better term, where you see a data set and you have at least a first approach on how much signal there is there. You can learn the technical skills later on, and you’ll be more motivated to learn more of the technical skills when you have some problem you’re trying to solve” (1,500 words)

There’s No Formula For Fixing Detroit

And that’s a good thing, because top-down, badly-engineered big plans to boost the city have only plunged it deeper into debt and decay. Better to nurture local initiatives, of the kind already reviving the downtown. “There’s an incipient venture-capital and startup scene, and lots of small creative businesses. The area’s pro sports teams are almost all back downtown. Young, upwardly mobile people are actually moving to Detroit” (1,760 words)

One Nation, Incentivised

If you tried to deduce American values from the behaviours that are subsidised or penalised by current fiscal policies, you’d conclude, among other things, that this is a nation which: doesn’t want fellow-citizens to have more children; doesn’t want young people to go to college; does want corporations to keep their money outside the country; does want people to drive a lot; and does want people to be fat (1,340 words)

The Business-Friendly Legislature Known As SCOTUS

Are Supreme Court justices “just a peculiar sort of legislators” with really long terms? It’s a reasonable way of thinking of them; and one with a long history among legal scholars. The big shift towards a more politicised Court came in the late 19C when the judges went from relying on the Constitution as the ultimate authority to citing “natural law”, which gave them a lot more leeway to make, or ratify, their own laws (1,550 words)

Reinhart, Rogoff, And How The Macroeconomic Sausage Is Made

If you follow economics closely, you will know this story already. If you don’t follow it at all, you may not even be interested. But if you fall between the two, here is a short, accessible presentation of the current cause celebre: a research paper which has encouraged policies of austerity, particularly in Europe, was based on a very limited range of countries, questionable weighting, and a spreadsheet error (1,048 words)

Remember: A Country Is Not A Company

“For countries the notion of national insolvency is a newer, and potentially very misleading, idea. Countries aren’t corporations. Technically almost every country would be insolvent if if was asked to pay all of its debt using its available assets. All governments in practice secure their national debts on their abilities to levy taxes” (880 words)

Remember: A Country Is Not A Company

“For countries the notion of national insolvency is a newer, and potentially very misleading, idea. Countries aren’t corporations. Technically almost every country would be insolvent if if was asked to pay all of its debt using its available assets. All governments in practice secure their national debts on their abilities to levy taxes”

How Amazon Trained Investors To Behave

Jeff Bezos delivers results, exudes authority, stays on message—and so persuades investors to accept his pursuit of long-term growth over short-term profits. “He’s a hedge fund veteran who has always taken a skeptical view of Wall Street, treating it more as a loopy rich uncle than the efficient information processor of standard finance theory”

Sitting Is the Smoking Of Our Generation

Sitting around can be as lethal as smoking, when it leads to obesity, though the externalities are more circumscribed. According to one study quoted here an extra hour of television-watching a day takes 11% off your lifespan: interesting if true. Hence the business fad for stand-up desks and stand-up meetings. Walking meetings better still

The Incentive Bubble

“Nothing is more important for a market economy than the structure of incentives for managers and investors. Unfortunately, the idea of market-based compensation is both remarkably alluring and deeply flawed.” Here’s why

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